My simplistic way of looking at BBI's predicament:
1. Assume that the average BBI customer rents 5 DVDs/month at $3.5/DVD and ends up paying $7/month in late fees. This customer generates total monthly revenue of $24.50 for Blockbuster.
2. If this customer shifts to BBI's MoviePass at 24.99/month, BBI doesn't lose any revenue due to the loss of late fees.
3. In fact, BBI is better off in this scenario, because the unlimited nature of MoviePass should generate increased in-store traffic, resulting in greater revenue from DVD sales, candy sales, etc.
Basically, I don't think that BBI is as bad off as everyone thinks. If MoviePass is successful in attracting customers, then BBI should do well.
BBI vs. NFLX:
Prior to BBI's newfound aggressiveness, NFLX had an advantage because of its (1) greater DVD selection; (2) attractive, all-you-can-rent price structure; (3) convenient mail-order distribution; (4) User-friendly website that makes it easy to find additional rentals.
The problem for NFLX is that:
1. Blockbuster, through its online offering, has matched NFLX's selection.
2. Blockbuster, through MoviePass, has matched NFLX's price structure.
3. Blockbuster, through its stores, will trump NFLX's distribution by providing customers with a choice of online/mail or in-store.
4. Blockbuster, through its 20+ years of in-store rental history, should be able to match NFLX's ability to recommend additional movies. This website is brand new and months ahead of its 4th Q target release date. Over time, BBI should be able to work out the kinks. After all, how hard can it be to set up a database that links off of prior rental history?
I can see why NFLX was attractive 6 months ago. Once BBI integrates in-store with online, what's the NFLX advantage? Personally, there's no way that I would choose to be a NFLX customer when BBI's price is substantially the same and offers me the ability to go to the store to rent/return movies. |
